Dr Rajesh Tharyan

Senior Lecturer in Finance

Dr Rajesh Tharyan joined the Xfi - Centre for Finance and Investment at the University of Exeter Business School as a lecturer in 2010. Prior to that he was an Associate Research Fellow at the Xfi (2008-2010).

Dr Tharyan holds a PhD in finance from the University of Exeter Business School and an MSc in International Accounting and Finance from the London School of Economics. He has extensive teaching experience at undergraduate, postgraduate and MBA level.

His current research covers empirical asset pricing, directors’ trading, the value premium, mergers and acquisitions and valuation effects of corporate social responsibility.

Key publications

Abstract:Environmental and Social Disclosures:. Link with Corporate Financial Performance

Environmental and social disclosures entail costs, yet increasingly, large listed firms are making higher and better quality disclosures. In this paper we examine the link between a firm’s environmental and social disclosures and its profitability and market value. We find that past profitability drives current social disclosures. However, consistent with the existing evidence, we do not find any relation between environmental disclosures and profitability. Further, while prior literature has largely focussed on environmental disclosure, we find that it is the social disclosures that matter to investors. We find that firms that make higher social disclosures have higher market values. Further analysis reveals that this link is driven by higher expected growth rates in the cash flows of such companies. Overall our findings are consistent with the resource based view of the firm and the voluntary disclosure theory, suggesting that firms with greater economic resources make more extensive disclosures which yield net positive economic benefits.

Journal articles

Abstract:Corporate Social Responsibility and Firm Value:
Disaggregating the effects on cash flow, risk and growth

This paper examines how the stock market values corporate social responsibility (CSR). We consider the multidimensionality of CSR and make a distinction between strengths and concerns. We disaggregate the effect on value by considering differences between forecasted profitability, long term growth and the cost of capital. For individual dimensions, in general strengths are valued positively, but weaknesses do not always detract from value. However, when an overall measure of CSR performance is employed, the result is a significant negative valuation of CSR concerns. These valuation effects are principally driven by CSR performance associated with better long run growth prospects, with a minor contribution made by a lower cost of equity capital.

Abstract:Environmental and Social Disclosures:. Link with Corporate Financial Performance

Environmental and social disclosures entail costs, yet increasingly, large listed firms are making higher and better quality disclosures. In this paper we examine the link between a firm’s environmental and social disclosures and its profitability and market value. We find that past profitability drives current social disclosures. However, consistent with the existing evidence, we do not find any relation between environmental disclosures and profitability. Further, while prior literature has largely focussed on environmental disclosure, we find that it is the social disclosures that matter to investors. We find that firms that make higher social disclosures have higher market values. Further analysis reveals that this link is driven by higher expected growth rates in the cash flows of such companies. Overall our findings are consistent with the resource based view of the firm and the voluntary disclosure theory, suggesting that firms with greater economic resources make more extensive disclosures which yield net positive economic benefits.

Gregory A, Tharyan R, Christidis A (2013). Constructing and Testing Alternative Versions of the Fama-French and Carhart Models in the UK. Journal of Business Finance & Accounting, 40(1-2), 172-214. Full text.

Publications by year

2015

Tharyan R, Hua S, gregory A (2015). In Search of Beta.

Abstract:In Search of Beta

Despite the arguments that can be made against using the CAPM, it is very widely used in regulation. In particular, it is relied upon in setting utility prices in each of Australia, New Zealand and the United Kingdom, and also features in this context in Germany. In addition, UK competition authorities make use the CAPM to assess profitability in the case of “market investigations”. All of these applications require beta as an input into the CAPM, but the beta estimates employed typically vary depending on frequency of the returns data used in their estimation. Given the implication of returns frequency for estimates of beta noted in the literature, and in particular the role of firm characteristics in this, this study undertakes a detailed examination of the evidence for the UK and shows that longer frequency betas have superior characteristics to high frequency betas. We find that differences in beta can be explained by opacity, size, liquidity and book-to-market factors. Our conclusions are unequivocal and have important policy implications for regulatory use of the CAPM, as they imply that low frequency beta estimates should always be preferred to high frequency beta estimates. They also have important implications for academic researchers using the market model in empirical investigations

Recognizing the benefits of international competences for firms expanding abroad, prior research advocated the positive role of executives’ international orientation, as reflected in international experience and national diversity of top management teams (TMTs). Yet research into managerial beliefs and biases as well as research into team composition suggests potential negative consequences of TMT international orientation due to overconfidence and inefficient decision-making. Combining these two perspectives, we predicted and tested non-linear effects of TMT international orientation on firm performance following foreign acquisitions. Analyses of 1,697 deals completed by 428 UK companies over a period 1999-2008 revealed that performance benefits may only accrue to the most experienced TMTs and that the benefits from TMT national diversity wane after a relatively low threshold. These findings shed new light on when TMT international orientation may (not) improve foreign acquisition performance, beyond the impact it has on internationalization decisions themselves as documented in prior research.

2014

Abstract:Corporate Social Responsibility and Firm Value:
Disaggregating the effects on cash flow, risk and growth

This paper examines how the stock market values corporate social responsibility (CSR). We consider the multidimensionality of CSR and make a distinction between strengths and concerns. We disaggregate the effect on value by considering differences between forecasted profitability, long term growth and the cost of capital. For individual dimensions, in general strengths are valued positively, but weaknesses do not always detract from value. However, when an overall measure of CSR performance is employed, the result is a significant negative valuation of CSR concerns. These valuation effects are principally driven by CSR performance associated with better long run growth prospects, with a minor contribution made by a lower cost of equity capital.

Abstract:Environmental and Social Disclosures:. Link with Corporate Financial Performance

Environmental and social disclosures entail costs, yet increasingly, large listed firms are making higher and better quality disclosures. In this paper we examine the link between a firm’s environmental and social disclosures and its profitability and market value. We find that past profitability drives current social disclosures. However, consistent with the existing evidence, we do not find any relation between environmental disclosures and profitability. Further, while prior literature has largely focussed on environmental disclosure, we find that it is the social disclosures that matter to investors. We find that firms that make higher social disclosures have higher market values. Further analysis reveals that this link is driven by higher expected growth rates in the cash flows of such companies. Overall our findings are consistent with the resource based view of the firm and the voluntary disclosure theory, suggesting that firms with greater economic resources make more extensive disclosures which yield net positive economic benefits.

2013

Gregory A, Tharyan R, Christidis A (2013). Constructing and Testing Alternative Versions of the Fama-French and Carhart Models in the UK. Journal of Business Finance & Accounting, 40(1-2), 172-214. Full text.

The modules I am currently teaching provides an overview of the different types of financial instruments, their primary characteristics and their markets. These instruments include equities, bonds, derivatives and alternative financial investments such as mutual funds, hedge funds, private equity, exchange traded funds etc. As such, the modules aim to provide students with a comprehensive overview from the perspective of a fund manager of valuation techniques for equity, bond and derivative instruments; provide a good understanding of various professionally managed funds and their investment strategies with particular attention given to the various hedge fund strategies; give insights into practical aspects of fund management through lectures/seminars by senior fund managers and the ability to appreciate the considerable empirical research literature on issues relating to various financial instruments, portfolio strategies and in the fund management area. These modules takes existing financial instruments and their organised markets as its starting point and aims to develop not only a scholarly knowledge of contracts but also a critical ability to judge the appropriate use of each instrument type within a portfolio context.